CVELP: Assignments: Operations

• OVERVIEW
• Course Material
• Assignments
• Schedule

The Operations section of your business plan provides the “nuts and bolts” that support the business overview you created in Chapter One. It does so by providing the details and supporting information that demonstrate that your business is/will be operated in an effective and efficient manner. Once you have read the course materials for this Chapter, your assignment is to write the Operations section of your business plan using the following outline:

PRODUCT DEVELOPMENT
This section will describe how you process your raw materials so that they become products. It should include:

• How you bring materials in, and produce outputs (if you are making a product).
• Where you will get the raw materials/supplies you need to produce your product or provide your service.
• How you will handle inventory if it applies to your business.

For example:
Woody’s Woodworks purchases raw pine lumber from Chopper’s Mill in 4x4x20 planks that are delivered to our shop in orders of 50 planks per load. The business has an open account with Chopper’s where we can order up to three loads on credit payable in 30 days. We also maintain accounts with two other lumber suppliers in case of a shortage of stock at Chopper’s.

Our product is produced by running the planks of raw pine lumber through our custom-designed planers that create our specialty molding. After a simple sanding, a light stain is applied and the product is ready for purchase in 10 and 20 foot lengths. Excess inventory of raw and finished products is kept in our on-site warehouse that is climate controlled to keep the wood from drying or warping.

EQUIPMENT, FACILITY AND STAFFING
This section will describe the equipment, facility and staffing you will use to provide the product(s) and/or service(s) including:

• The type and kind of equipment you will use and any special features or critical advantages you will get from this equipment.
• The type and size and location of the facility and why it is appropriate for your business.
• Any special design, improvements, etc, for the facility.
• Size and type of staff, special skills or unique issues if there are any (e.g. licenses, certifications, or special skills/talents).
• Sources (others you may/will use in providing your products and/or services).

For example:
"AAA Appliance Repair will provide in home repair service to the Greater Fresno Area using trained service technicians and state-of-the art service trucks that will carry parts for 90% of all service calls. They will be controlled with a GIS positioning system operated from a centralized call center that will use a Rolm call monitoring system to insure 100% call answering with a live customer service agent (no mail box systems)".

The business operates from a small office at 1234 W. Main Street in Anytown, CA. The office is used as a place to conduct administrative business, take service calls, and dispatch technicians. 100% of all service is provided at the client’s residence, and we do not solicit walk-in business, so this small office is appropriate for our needs.

DISTRIBUTION
Explain how your product/service gets to the customer both in terms of how the customer discovers and orders the item and how they receive the item. Then discuss your service levels.

• How you serve your customers (in-store sales, phone orders with delivery, in-home consultation, etc.).
• How you will handle orders and delivery.
• Service levels (hours/days of service, standard of service, and quality).

For example:
The Basketball Boutique is a retail operation where customers can purchase basketball memorabilia and accessories on-site, through a mail-order catalog, and via our website, www.basketballboutique.com. If the customer purchases an item through the catalog or website the orders are processed within 48 hours. All orders are shipped via UPS unless the customer chooses express 2-day shipping (at an extra fee).

All Basketball Boutique products come with a full money-back, no questions asked guarantee. Cash refunds (minus shipping charges) are given if a product is returned unopened in the original packaging. If a product is returned because it was damaged or defective, a replacement item is sent via express 2-day shipping. Store hours are Monday through Saturday from 10:00 a.m. to 7:00 p.m. The web site is fully functional and operates 24 hours a day.

BREAKEVEN POINT
This is where you will:

• Determine what and how much your fixed costs are.
• Determine what and how much your variable costs are.
• Show the calculation for the amount of business you will need to accomplish to breakeven (using either the format and calculation shown in the Course Materials or the Excel formatted spreadsheet shown below).

For example:
Based on the figures show in the break-even analysis table shown below, Grace’s Golden Gates will become profitable after selling a minimum of twenty gates per month.

BREAKEVEN ANALYSIS

Estimated price per unit $ 50.00

Variable cost per unit (material plus labor) $ 15.00

Fixed cost per month: $ 500.00

TIPS FOR COMPLETING THIS ASSIGNMENT
 

• Continue to follow the format shown in the previous homework assignment so that your plan is consistent throughout.
• Remember that (especially in the case of prospective or recently-started businesses) you may not know all the answers to the questions posed to you. Answer each section as completely as possible and be sure to update it as you get more information. It is very likely that upcoming assignments (especially industry/competitive analysis, marketing, and accounting) will help you fill in the blanks.
• Use common sense in addressing the issues one at a time and answer them simply and honestly. For example, if you do not have a location for your business, mention what you want to have:

“XYZ and associates will be leasing a 1000 – 1,200 square foot office facility in the Southeast section of the city.”

“Jiffy manufacturing is currently pursuing the lease or purchase of an existing 10,000 square foot building in an industrial area that will allow us to manufacture and ship our custom car parts.”

• Many sections of this homework assignment are answered by simply stating the facts. Most issues will apply to your business if you are producing a product and many will not apply if you are providing a service. Be clear and state your situation:

“This will be a home-based business because all services are provided directly to the customer at a location of their choice.”

“Because this is a consulting business, it is not necessary to maintain an inventory or materials. We use standard office products in the course of our business and keep an adequate supply in stock using an open account at the Mega-Office Supply store.”

“This is a retail clothing and accessories business that will purchase all stock and supplies from the following vendors...”

• If you’re not quite sure how to start, take a look at the sample business plan located in the Supplemental section of the Course Materials. You can follow the format shown in the sample plan, borrow some of the wording to get you started, or both.
• If you are still unsure on how to complete this week’s assignment, you can get help by e-mailing your coach with your specific question(s).

FREQUENTLY ASKED QUESTIONS
Some of the “Operations” questions seem to apply to manufacturers. If I’m going to start a retail business, should I even bother with this section?
Many retail and service businesses ask something like this. The Operations section of a business plan is applicable to every type of business because it demonstrates that you know exactly how your business will function. Answer all the questions that make sense for your business. If something doesn’t make sense for your business – say so and explain why (see examples in the “Tips” section above).

I have a home-based business with minimal fixed and variable costs. So, when I make a sale it is mostly profit. Why should I calculate my breakeven point?
Calculating your breakeven point is an extremely important exercise for all business owners because it can identify potential problems (too much overhead, too little profit margin, sales to low to support operations, etc.). It also demonstrates that the owner has a firm grasp of one of the fundamental fiscal controls of the business: knowing how much money it takes to make/provide their products/services and how much has to be sold before a profit is made.

Operations_homework.pdf - 4 pages